You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDEThe downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDEThe national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUMOf course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.

Moving into a new home is an exciting time, and you’re probably daydreaming about decor and paint schemes and new furniture. But before you get into the fun stuff, there are some basics you should cover first.

Change the locksEven if you’re promised that new locks have been installed in your home, you can never be too careful. It’s worth the money to have the peace of mind that comes with knowing that no one else has the keys to your home. Changing the locks can be a DIY project, or you can call in a locksmith for a little extra money.

Steam clean the carpetsIt’s good to get a fresh start with your floors before you start decorating. The previous owners may have had pets, young children, or just some plain old clumsiness. Take the time to steam clean the carpets so that your floors are free of stains and allergens. It’s pretty easy and affordable to rent a steam cleaner—your local grocery store may have them available.

Call an exterminatorPrior to move-in, you probably haven’t spent enough time in the house to get a view of any pests that may be lurking. Call an exterminator to take care of any mice, insects, and other critters that may be hiding in your home.

Clean out the kitchenIf the previous occupants wanted to skip on some of their cleaning duties when they moved out, the kitchen is where they probably cut corners. Wipe down the inside of cabinets, clean out the refrigerator, clean the oven, and clean in the nooks and crannies underneath the appliances.

Is it better to rent or buy a home? This is a question that everyone has to process through at some point in time. It’s not always best to buy and it’s certainly not always best to rent. A person’s lifestyle, financial situation, relational situation, and employment are all factors that can sway the answer to one side to the other.

The Pros of Renting

Easy To Move On

When you rent a home, you are free to move on as soon as your lease is expired. There’s no house to sell. This is one of the most common reasons for renting a home, rather than buying. If you are unsure of how long you will be living in an area, renting is usually your best option. Selling a home is a lot of work and expense, so it makes sense to buy a home when you are sure that you want to stay in the home for a few years. This allows you to build up equity and make money when you sell, which you cannot do when you rent.

No Property Taxes

For many homeowners, property taxes are the 2nd highest cost of owning a home, next to their mortgage payment. Home owners insurance is a close 3rd for expenses, which is another fee that you do not have to pay when you rent a home…. or do you? I have heard the argument that the cost of property insurance and home owners taxes are enough to make people rent, rather than buy. But think about this, the landlord of the property that you rent is also paying property taxes and insurance. So, who is really paying the property tax and insurance? It just makes sense that the cost of the tax and insurance are being passed on to the tenant. This means that tenants are inadvertently paying the taxes and insurance for their landlord, just not directly. There are also tax advantages to owning a home as well.

No Maintenance

Every home needs maintenance and repairs over time. When you rent a home, the repairs are passed on to the landlord or property management company. This is a very popular reason to rent. Of course, there are down sides to this as well. Some landlords and property management companies are not very prompt or easy to work with. Just do a quick Google search for reviews on property management companies in your area. You may find a long list of tenants who have complained that it took days or weeks to fix issues in their rental properties that should have been fixed immediately, as well as smaller issues that never got fixed at all. However, if you have a good landlord, your maintenance worries are minimal.

The Pros of Buying

You Can Make It Yours

When you buy a home, you are free to paint, change fixtures, tear down walls, or put up new walls. It’s your home and you can do whatever you want with it. When you rent a home, you are not allowed to change paint colors, fixtures, or remodel. Having the freedom to do what you want with your home is one of the greatest benefits of homeownership. My wife and I have rented a home after moving to a new area and it was very hard for us to leave the house alone. Many people are like us and want to own a home for the freedom to make it the way we want it. A home is a place that captures many of our memories, which is why we want it to reflect us and our design choices.

No Payment Hikes

When you agree to the terms of your mortgage, chances are very high that you will have a fixed rate. This means that your mortgage payment will not increase over the life of the loan. The security of knowing your payment amount will never change is very comforting. It’s common for rental properties to have payment increases every time that the lease is resigned. Especially in areas like Denver & Seattle where rents have increased dramatically over the past few years.

Build Equity

When you buy a home, a portion of your payment goes straight to paying off your mortgage. Every time you make a payment, you earn equity in your home. As the price of your house appreciates, your mortgage goes down and your equity steadily rises. If you buy a home in an area that appreciates well and you pay down your mortgage over 5+ years, you will have a nice chuck of equity to use however you like. You can use your equity to move into a larger home, refinance and take out some cash, or leave it alone and let it grow!

The Cons of Renting

Increasing Rents

Rents nationwide seem to be rising fast right now. In Colorado Springs, rents have been steadily rising for years. This makes it hard to plan your future finances when you don’t know what your rent payments are going to be after your lease expires. Once a lease is expired, a landlord can raise the rent as high as they want. If you disagree to the new terms, you’ll need to find a new place to live, which is also an expense and very exhausting. The unknown future of rents can make tenants feel insecure and unsettled.

Lease Deadline

When you sign a lease, it will most likely have a deadline. Many leases are structured for a year. Once the lease is up, there is no certainty that you will be able to renew. Sometimes landlords will sell the rental property after a lease is expired, or have family and/or friends move in. The future is always uncertain when you rent a home, which makes long term life plans more difficult and uncertain.

No Equity

Every rent payment made goes straight to the land lord. You do not have any ownership or equity in the property. This is the hardest part of renting for most people. Knowing that every dollar of your rent is gone for good is discouraging and causes tenants to look into owning their own home. Rent always costs much more in the long run. Imagine renting for 10 years, as opposed to paying down a mortgage over 10 years. The person who pays down their mortgage is going to have a nice chuck of equity when they sell, as opposed to the person who rents and has no equity after 10 years.

The Cons of Buying

Need Money For Down Payment

When you buy a home, it’s common for the mortgage company to require you to put a certain amount of money into the deal as a down payment. This is usually between 3% to 5% of the cost of the home. There are down payment assistant programs and other mortgage options for certain people, so this is not always a con to owning a home. There are misconceptions that home buyers need as much as 20% down, but this is usually not the case. The best way to find out is to talk to a mortgage lender and know your options.

The Cost of Selling

Selling a home can be costly. Realtor fees can run from 4% to 6% of the sales price of your home. If your home needs some work before selling, you’ll also have to come up with the money to make those necessary updates or repairs. Selling a home is much more stress than buying a home. It usually requires months of planning and preparation to really do it right and make the most amount of money when you sell your home.

Homeowner Responsibilities

When you own a home, it is your responsibility to maintain the property. You’ll need to work on the landscaping, have the heater & air conditioner serviced, and repair any damages to the property. Your home owners insurance will typically help you with many of the most costly issues, like roof repairs and major damages. The rest is up to you. I personally prefer this because I can fix problems, like a broken garbage disposal or ceiling fan, and replace old items with new high-end items to make my house run smoother. My dishwasher and garbage disposal are virtually silent since I replaced them recently; and I prefer to do these things myself.

The Verdict

Both renting and buying have their advantages and disadvantages. It really comes down to the stability of your living situation. If you have a career that is moving forward and you feel like you are going to be in your current city for a while, buying a home makes much more sense. If your life is up in the air and you don’t know what next year is going to be like, renting a home makes a lot more sense. Buying a home costs less in the long run and builds your financial situation. Renting a home is expensive and always leaves you without any true ownership or equity.

Taking the time to truly look at all the aspects of each option can help you plan your life to move in the direction that benefits you the most. If you plan on buying a home, there is a ton of information online to help you. Start with this article that explains how to buy your first house. It will give you a quick overview of the home buying process and help you identify where to start. Good luck and happy house hunting!

This step-by-step guide will walk you through each step of the home buying process. Use it as reference and remember to ask your REALTOR® anytime you have questions. Your REALTOR® will help you through each step.

Preparing your finances

is the very first step in buying a home. This will allow you to find the price range that fits your budget before you start looking at homes. If you begin your home search in a higher price range than you are approved for, you are setting yourself up for disappointment. Start preparing your finances right from the start and you’ll be ready for the next step. Here are 5 important tips to help you through the home financing process:

Know Your Credit HistorySome people may just assume that their credit is good enough to buy a house because they have never had a late payment. Others may be afraid to check their credit because they assume that it’s so bad that they could never qualify. Both could be wrong. No matter what your situation is, you need to check your credit history and know your credit before buying a home. It doesn’t matter how good or bad you are with money, all that matters is what’s on your credit history. If you find something on your credit history that is incorrect, be sure to resolve it before buying a house.Calculate Your Debt-to-Income Your debt-to-income ratio is one of the main criteria a mortgage lender will consider when determining your loan pre-approval. This number is found by comparing your average monthly debt (bills, taxes, etc.) to your average monthly income. Often, mortgage lenders don’t want higher than a 43% debt to income ratio. Here’s an example of how to calculate your debt to income. For example if your mortgage payment is $2,000 per month and your auto and credit card payments are $1,000 per month, your total debt is $3,000. For brevity we will assume that these are your only monthly debts. If your income is $7,000 per month, your debt-to-income would be 43% ($3,000 [debt] % $7,000 [income] = 43%). That is right at the limit.

Gather Your Tax, Financial, & Employment DocumentsWhen you apply for a mortgage, the loan officer will ask you for previous years tax returns, employment verification forms, and previous month’s bank statements. It’s good to have this information accessible before looking at homes. Some lenders may not ask for these documents until you are under contract. If you are asked for these documents later and you cannot provide them in a timely manner, it could affect your ability to purchase the home. Make sure you have all of your key documents ready, and preferably get them to your loan officer before you put a contract on a home.

Find A Mortgage LenderNow that you have checked your credit, calculated your debt-to-income, and have gathered all your financial docs, you’re ready to talk to mortgage loan officer. There are MANY loan officers to choose from. Be sure to take your time and find the one that works best for you. Closing costs, interest rates, and speed of closing are all good items to ask your loan officer about. Most REALTORS® will have lenders who they can recommend as well. Be sure to contact a few different ones to compare rates and personality types. Choose one that you feel comfortable working with. You will be communicating with them often throughout the process of your home purchase.

Complete Your Loan Pre-ApprovalIn order to be treated as a legitimate buyer when you are out looking at homes, you will need to have a pre-approval letter ready from your lender. Once you have gone through all of the steps above and found a good mortgage lender, it’s time to finalize your pre-approval. Make sure that your lender has thoroughly investigated your finances. Some lenders will do a basic mortgage pre-qualification that is based off of minimal questioning. This can mean problems later when you are actually under contract to purchase. A full mortgage pre-approval will help guarantee that your financing doesn’t fall apart later while you are halfway into the home buying process.

Find A Home

Once you have prepared your finances to buy a home, the next step is to find one. This is the fun part of the home buying process, but it can also be exhausting. Following the steps below will help you determine a clear path to finding the best house that fits your needs.

Find A Good REALTOR®A good REALTOR® is your strongest asset when buying a home. The will provide you will online tools that will keep you updated when new homes come on the market. They will also help educate you on the process and advise you how to respond to certain situations that will arise throughout the process. Don’t just hire the first REALTOR® that you know. Be sure to take your time and find a REALTOR® with strong credentials and a proven track record of helping people.

Research Local AreasBefore you can find a home, you really need to know which part of town you want to live in. Be sure to research local crime stats, school ratings, and area amenities to help determine the areas that you would enjoy living in. These things also affect future resale, so take that into consideration when doing your research. Within certain areas, there will also be specific neighborhoods that you may like or dislike. It takes time to gather all of this information, so be patient and do your due diligence.

Search For Homes OnlineWhen you know the areas that you like best, you can go online and look at all of the homes available in those areas. You can also set yourself up to be notified anytime a new home comes on the market within your search criteria. On our site, all you have to do is click “Save Search” on our search page and you will be setup. This is one of the best ways to keep up with the market. Remember that homes usually look different in person than they do online.

Visit Homes In PersonOnce you have gathered some homes that you would like to see, contact your REALTOR® and setup a time to view them. Your agent will handle all of the showing coordination and details. As you visit the homes, be sure to take notes, photos, or videos to help remind you of the details. It’s easy to forget aspects of a home when you are looking at multiple properties within the same day. As you’re looking at homes with your REALTOR®, be sure to verbalize the things that you do and don’t like so your agent can learn what your styles and preferences are.

Make An OfferOnce you have found the perfect home, it’s time to make an offer on it! Your REALTOR® will be able to help you determine a good offer price by providing you with recent past sales data and current market data. Every area, price range, and home style have different aspects that determine value. Taking all of these into account will help you present an offer that is fair, but strong. Some properties may be in multiple offer situations, which requires even more thought when structuring the offer details.

Get The Keys

Now that you have prepared your finances and found a home, it’s time to close the transaction and get the keys! These items need to be handled in a timely manner. Your REALTOR® will help guide you through each step. You can use this section as a reference as you are moving through the final steps of buying your new home.

Negotiate The Transaction TermsOnce you have submitted an offer on a home, it’s possible that you will receive a counteroffer from the seller. You will need to negotiate the terms of the contract, such as the closing date, seller concessions, appraisal deadlines, inspection deadlines, repairs, etc. Your REALTOR® will guide you through all of your options and make everything clear. There are many different variables to negotiate on a sales contract, so take your time and be sure to think through every option. Once you’re under contract it’s very difficult, if not impossible, to change things later.

Deposit Earnest MoneyOnce you have an executed sales contract signed by both parties, you will need to submit your earnest money. Earnest money is kind of like a down payment for the transaction. Sellers want more than just a signed contract before they take their house off of the market. Earnest money proves to the sellers that you are a serious buyer and ready to purchase a home. The earnest money is credited back to you at closing, or will default to the seller if you cannot perform the details of the sales contract.

Perform InspectionsMost contracts are written with an inspection period to allow the buyer time to hire a home inspector and have the property thoroughly inspected. There are many different types of inspections, such as radon, mold, pest, structural, and full home inspections. Having an inspection performed is one of the most important parts of the home buying process. Make sure that you allow plenty of time to get all of your inspections done within the days allotted in your sales contract. Once you are past inspections, you’re almost done!

Perform AppraisalThe appraisal is one of the last steps in the home buying process. Mortgage companies require appraisals to verify that the loan amount they are providing is equal to, or better than the appraised value of the home. It’s protection for the lender. If the house does not appraise at value, then the contract will either be terminated or renegotiated. Be sure to have the appraisal ordered as soon as your inspections are done. Delayed appraisals are one of the main causes of late closings.

Close The TransactionOnce you are past the inspections and appraisal process, you can set up a closing time with your title company and the other party. Be sure to bring your driver’s license (or passport) to closing, along with any monetary items required by the sales contract and/or lender. Once both parties have signed all of the documents and the mortgage company has funded the loan, you will get the keys. You are now the proud owner of your new home.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about your site.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about your site.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about your site.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about your site.

This is an example of a WordPress post, you could edit this to put information about your site so readers know where you are coming from. Create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress. This is an example of a WordPress page, you could edit this to put information about your site so readers know where you are coming from. You can create as many pages as you like and manage all of your content inside of WordPress.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.

This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like in order to share with your readers what is on your mind.